Today, the fifth-largest loan position in the MakerDAO system minted 1 million new DAI tokens. The transaction fee on the $996,216 loan was a mere 73 cents.
And it’s not the first.
The first loan issuing 1 million new DAI stablecoins was made in late June by the seventh-largest collateralized debt position (CDP) in the MakerDAO system. CDPs are essentially programmatic loans taken out by users who lock-in holdings of ether (ETH) to draw out subsequent holdings of DAI from the MakerDAO system.
The foundation maintaining the system says the recent upswing in ETH prices is making large loans more common.
“I would not be surprised to see a $3 million mint by end of the year,” Joe Quintilian, head of proprietary trading at the MakerDAO Foundation, told CoinDesk. “Minting high dollar amounts has been steadily increasing over the past year.”
The total supply of DAI now stands at roughly 91 million and may soon exceed a record high of 95 million. But – with a debt ceiling of 100 million DAI currently in place – that growth is not without potential repercussions.
“I think DAI supply will continue to grow as markets stay bullish,” Michael McDonald, creator of DAI analytics site mkr.tools, told CoinDesk. “If it starts hitting that 100 million and people still want to draw more DAI, you may have to really increase the stability fee. It all depends on what the governance decides to be about that.”
Stepping back, the MakerDAO “stability fee” is an interest rate that all users are required to pay back into the MakerDAO system once they close out their DAI loans. The stability fee, currently at 18.5 percent, plays a crucial role in staving off surplus demand and restoring DAI’s dollar valuation.
“My guess is as the price of ETH has gone up significantly over the past few months, CDPs are heavily over-collateralized so owners now feel comfortable drawing out more DAI against their ETH collateral,” McDonald said.
Time to raise the ceiling?
Given the bullish market trend, McDonald tells CoinDesk that MakerDAO token holders may soon have to consider increasing the hard supply cap on DAI, which currently sits at 100 million.
This will all depend, McDonald says, on when multi-collateral DAI is introduced into the MakerDAO system.
With multi-collateral DAI, users will be able to mint new DAI tokens by locking holdings of alternate cryptocurrencies beyond just ETH. Each cryptocurrency will have its own unique supply cap, called a “debt ceiling,” which ensures sufficient diversification of assets backing DAI’s value.
“It depends on how far along multi-collateral DAI is,” said McDonald. “If multi-collateral DAI is not going to launch until Q4 [of this year] then I’d be all for raising the debt ceiling to allow for some amount of growth in the meantime.”
But ultimately, this decision – like the ones to increase the stability fee – are in the hands of the voters of the MakerDAO system, those who hold MKR governance tokens.
Since the MakerDAO lending protocol went live on the ethereum blockchain in 2017, the DAI supply has seen strong upward growth for nearly a year and a half. So much so that beginning in January the stablecoin began trading at market prices below its targeted dollar valuation.
Over the course of four months and eight consecutive raises, the stability fee went from 0.5 to 19.5 percent. These increases did prove to retract DAI supply and raise stablecoin prices back to the dollar valuation.
More recently, however, DAI supply looks to be back on the incline and DAI prices as of this week are hovering at a $0.99 valuation across major cryptocurrency exchanges.